Many on Fed want further jobs improvement before tapering QE

Many Federal Reserve officials want to see more signs employment is picking up before they’ll begin slowing the pace of $85 billion in monthly bond purchases, according to minutes of policy makers’ last meeting.

“Many members indicated that further improvement in the outlook for the labor market would be required before it would be appropriate to slow the pace of asset purchases,” according to the record of the Federal Open Market Committee’s June 18-19 gathering released today in Washington.

Today’s minutes said “several members judged that a reduction in asset purchases would likely soon be warranted.” Those members said the “cumulative decline in unemployment since the September meeting and ongoing increases in private payrolls” had increased their confidence that the labor market had improved, the minutes showed.

Chairman Ben S. Bernanke said in a press conference after the meeting that the Fed may trim its bond-buying program this year and halt it around mid-2014 if economic performance tracks the central bank’s forecast. The minutes show officials want to see that forecast confirmed before tapering their purchases.

Not all members agree on when to begin slowing the pace of purchases. Some on the panel “need to see more evidence that the projected acceleration in economic activity would occur, before reducing the pace of asset purchases,” according to the minutes.

Stocks Rise

Stocks rose and bond yields fell after the release of the minutes. The Standard & Poor’s 500 Index rose 0.1% to 1,654.57 at 2:06 p.m. in New York, while the yield on the 10- year Treasury note fell to 2.64% from as high as 2.67% earlier in the day.

The minutes refer to the 12 voting policy makers as “members” and the entire 19-person policy making group as “participants.” Only five of the 12 regional Fed presidents have a vote in any given year.

In a discussion about the appropriate path of the balance sheet among the 19 FOMC participants, “about half” indicated “it likely would be appropriate to end asset purchases late this year,” the minutes said. “Many other participants anticipated that it likely would be appropriate to continue purchases into 2014,” the minutes said, while “a few” wanted to slow or stop the purchases at the June meeting.

St. Louis Fed President James Bullard dissented from the Fed’s statement in June, saying that in light of low readings on inflation the committee should “signal more strongly its willingness to defend its goal of 2% inflation.”